10/24. The General Accounting Office (GAO)
released a study [94 pages
in PDF] titled "Telecommunications: Issues Related
to Competition and Subscriber Rates in the Cable Television Industry".
The report finds that competition, whether from other wire based cable
operators, or from direct broadcast satellite (DBS), leads to lower prices and
better quality service.

The report states that "Competition from a
wire-based provider -- that is, a competitor using a wire technology, such as
a second cable operator, a local telephone company, or an electric utility -- is
limited to very few markets. However, in those markets where this competition is
present, cable rates are significantly lower -- by about 15 percent -- than cable
rates in similar markets without wire-based competition."

It adds that "Since 1999, when DBS operators acquired the legal right to provide local
broadcast stations (such as affiliates of ABC, CBS, Fox, and NBC), these
companies have emerged as important competitors to cable operators. In
particular, in areas where subscribers can receive local broadcast stations from
both primary DBS operators, the DBS penetration rate -- that is, the percentage of
households that subscribe to satellite service -- is approximately 40 percent
higher than in areas where subscribers cannot receive local broadcast stations
from both primary DBS operators. In addition, the DBS provision of local
broadcast stations has induced cable operators to improve the quality of their
service by providing their subscribers with approximately 5 percent additional
cable networks." (Parentheses in original.)

The GAO report also assesses the Federal
Communications Commission's (FCC) cable rate reports. It concludes that
these do "not appear to provide a reliable source of
information on the cost factors underlying cable rate increases or on the
effects of competition. GAO found that cable operators did not complete FCC’s
survey in a consistent manner, primarily because the survey lacked clear
guidance. In particular, GAO found that 84 of the 100 franchises it surveyed did
not provide a complete or accurate accounting of their cost changes for the
year. Also, GAO found that FCC does not initiate updates or revisions to its
classification of competitive and noncompetitive areas. Thus, FCC’s
classifications might not reflect current conditions." (Parentheses in
original.)

The GAO also addresses cable rates. It finds that "During the past 3
years, the cost of programming has increased considerably (at least 34 percent),
driven by the high cost of original programming, among other things.
Additionally, cable operators have invested large sums in upgraded
infrastructures, which generally permit additional channels, digital service,
and broadband Internet access."

The report also finds "Technological, economic, and contractual factors
explain the practice of
grouping networks into tiers, thereby limiting the flexibility that subscribers
have to choose only the networks that they want to receive. An à la carte
approach would facilitate more subscriber choice but require additional
technology and customer service. Additionally, cable networks could lose
advertising revenue. As a result, some subscribers’ bills might decline but
others might increase.

Finally, the report comments that "Although reregulation of cable rates is
one option, promoting competition could influence cable rates through the market
process."

Sen. McCain stated in a release that "The GAO Report confirms that
competition matters. Competition brings lower rates, improved service quality,
and more choices for consumers. According to the report, consumers in the few
markets with a choice of a second cable company pay 15 percent less for cable."

He added "The apparent implication for all other consumers is that they continue to be
fleeced by their cable operators. Consumers benefit from more choices -- the
choice of video distributors, the choice of cable networks, and the choice not
to pay for multiple channels that they do not watch."

He also stated that "The Report addresses numerous issues ripe for
examination by the Committee,
including doubts about the reliability of the FCC's assessment of cable
competition, increased sports and other programming costs, the impact of
ownership affiliation on cable carriage, and a la carte programming options.
Moreover, it discusses numerous options for policy makers to consider in
addressing escalating cable rates. These are complex issues, and I look forward
to reviewing the report more closely at a hearing of the Commerce Committee in
the near future."

Rep.
Billy Tauzin (R-LA), the Chairman of the
House Commerce Committee, stated
in a release that "I am committed to ensuring that consumers reap the benefits
of a robust media and telecommunications marketplace. Today's GAO report
confirms that competition from satellite and other multichannel television
services is increasing, and that the cable industry is responding. The result is
better service to consumers at rates that are 15 percent lower where competition
is present."

Rep. Tauzin added that "The report indicates that 'taking steps to
promote competition' and 'leveraging the normal workings of the marketplace'
will yield additional benefits. With this in mind, I will continue to work with
Telecommunications and Internet Subcommittee Chairman
Fred Upton to further
accelerate competition in the media marketplace, spur innovation and promote
even better service to consumers."

Robert Sachs, P/CEO of the
National Cable Telecommunications Association
(NCTA), stated in a
release
that "GAO's analysis confirms that cable price increases reflect significant
investments by cable operators in infrastructure and programming, which have
improved the quality and consumer value of cable television. The report also
shows, significantly we believe, that proposals to reregulate cable program
service would not benefit consumers. Rather, forcing cable operators to package
programming a la carte, would produce a net loss for many cable customers, who
would end up paying higher prices for fewer channels."

Randolph May of the Progress and Freedom
Foundation (PFF) stated in a
release that "the
factors that have contributed most to increasing cable rates are the huge sums
invested, around $75 billion since 1996, to upgrade cable infrastructure and
increasing program costs." He added that "these investments have led to more
consumer choice and the availability of widespread broadband Internet service".
He recommended that the government should "ensure that all broadband technology
platforms, whether cable, telephone, satellite, wireless are not subject to
public utility-type rate or other regulation."

USTR Offers Recommendations to Japan
Regarding Regulatory Reform

10/24. The Office of the U.S.
Trade Representative (USTR) released a
report
[59 pages in PDF] titled "Annual Reform Recommendations from the Government of
the United States to the Government of Japan under the U.S.-Japan Regulatory
Reform and Competition Policy Initiative". It addresses, among other topics,
information technology, intellectual property, communications, competition
policy, and transparency.

Information Technology. The USTR report recommends that
Japan "Expand nationally and make permanent the Special Zones to promote IT and
e-education; remove existing barriers that impede B-to-B and B-to-C e-commerce;
increase private sector input at all stages of the IT policy-making process."

The report also recommends that Japan "Support private sector self-regulatory
mechanisms for privacy and Alternative Dispute Resolution" and "ensure
transparency and inter-ministerial coordination in the implementation of
guidelines and standards for Japan’s new privacy law and network security".

It also recommends that the government of Japan "Implement reforms in IT
procurement procedures based on the principles of open competition,
technological neutrality, transparency, and private sector-led innovation."

Intellectual Property Rights (IPR) Protection. The report recommends
that Japan extend the copyright term for sound recordings, and "strengthen
protection of digital content and the enforcement system against IPR
infringement."

Communications. The report offers several communications
related recommendations. It recommends an independent regulatory agency, and an
end to the "Ministry of Public Management, Home Affairs, Posts and Telecommunications (MPHPT)
control over NTT’s business decisions." It also recommends increased public
participation in, and judicial review of, the MPHPT's regulatory decisions.

It also recommends deregulation of non-dominant carriers, but
reinforced "dominant carrier safeguards to prevent abuses by carriers with
market power."

10/25. President Bush proclaimed October 26 through November 1 to be
"Protection From Pornography Week". He issued a
proclamation in which he reviewed the recently enacted Dot Kids bill,
the PROTECT Act of 2003, and DOJ prosecutorial efforts.

The Dot Kids Implementation and Efficiency Act of 2002,
HR 3833 in
the 107th Congress, Public Law No. 107-317, required the
National Telecommunications and Information
Administration (NTIA) to create a second level domain within the .us country
code domain that is restricted to material that is not harmful to minors. Bush
called it "child-friendly zone on the Internet".

The Prosecuting Remedies and Tools Against the Exploitation of Children Today
Act of 2003 (PROTECT Act) is
S 151 (108th
Congress). Bush signed the bill on April 30, 2003. It is now Public Law No.
108-21. This bill includes several tech related items, including a ban on use of
certain misleading domain names, provisions pertaining to computer generated
images, and an expansion of the list of offenses that may serve as a predicate
for the issuance of a wiretap order.

Bush stated that "We have committed significant resources to the
Department of Justice to intensify
investigative and prosecutorial efforts to combat obscenity, child pornography,
and child sexual exploitation on the Internet. We are vigorously prosecuting and
severely punishing those who would harm our children. Last July, the
Department of Homeland Security launched
Operation Predator, an initiative to help identify child predators, rescue
children depicted in child pornography, and prosecute those responsible for
making and distributing child pormography."

Said Bush, "we are making progress in protecting our children from
pornography".

10/24. President Bush gave a
speech
in Honolulu, Hawaii in which he addressed class action reform legislation pending
in the Congress. He stated that "we need to cut down on the frivolous lawsuits
which increase the cost of medicine. People who have been harmed by a bad doctor
deserve their day in court. Yet the system should not simply reward lawyers who
are fishing for rich settlements. Frivolous lawsuits drive up the cost of health
care and they, therefore, affect the federal budget. Medical liability reform is
a national issue that requires a national solution. The House of Representatives
has passed a good bill to reform the system. The bill is now stuck in the United
States Senate. The Senate must act on behalf of the American people. Senators
must understand no one has ever been healed by a frivolous lawsuit." The
House has passed the bill. The Senate failed to end a filibuster last week.

10/24. Attorney General John
Ashcroft gave a
speech to the
International Association of Chiefs of Police
(IACP) in Philadelphia,
Pennsylvania in which he touched on some of the surveillance provisions of the
USA PATRIOT Act. He stated that "Under the Patriot Act, we have been able to use
the proven tactics and technologies used in the fight against organized crime
and drug smugglers. With the common-sense reform of "roving wiretaps," we have
been able to track the communications of those terrorists who switch phones to
avoid detection. Under the Patriot Act, we can ask for important business
records that might lead to important clues. And thanks to the Patriot Act, under
a federal judge's supervision in critical cases, we can conduct an initial
search of a terrorist organization without tipping off members of the
operation."

10/21. Rep. Bill Shuster (R-PA) introduced
HR 3368, a
bill to establish "a pilot grant program for the purpose of awarding grants to
eligible vocational and career technology schools for retraining displaced
workers in high technology fields". It would authorize the appropriation of $50
Million for fiscal year 2005. It would only apply to the state of Pennsylvania. It
was referred to the
House Committee on Education and the
Workforce. See also, Shuster
release.

The Senate will meet at 12:00 NOON to resume consideration of
HR 2800,
the Foreign Operations Appropriations Act, Fiscal Year 2004. At 2:00 PM it will
resume consideration of the nomination of Michael Leavitt to be Administrator of
the Environmental Protection Agency (EPA).

12:00 NOON. Deadline to submit comments to the
Office of the U.S. Trade Representative (USTR)
regarding countries that deny adequate and effective protection of
intellectual property rights or deny fair and equitable market access to U.S.
persons who rely on intellectual property protection. Section 182 of the Trade
Act of 1974 requires the USTR to prepare a report. Section 182, which is
codified at 19
U.S.C. § 2242, is also referred to as "Special 301". This is an out of
cycle review. The USTR announced that this review will focus on Korea. However, it
added that "Additional countries may also be reviewed as a result of the
comments received pursuant to this notice, or as warranted by events." See,
notice in the Federal Register, October 3, 2003, Vol. 68, No. 192, at Page
57503.

RESCHEDULED FOR OCTOBER 28.2:00 PM. The House
Ways and Means Committee will meet to mark up
HR 2896,
the "American Jobs Creation Act of 2003". This bill would, among other
things, replace the FSC & ETI tax regimes that the WTO held to be
illegal export subsidies. Location: Room 1100, Longworth Building.

Deadline to submit written comments to the
Internal Revenue Service (IRS) regarding its notice of proposed rulemaking
(NPRM) regarding computation and allocation of the credit for increasing
research activities for members of a controlled group of corporations or a
group of trades or businesses under common control. The rules implement the
research and development tax credit codified at
26 U.S.C. § 41.
See,
notice in the Federal Register, July 29, 2003, Vol. 68, No. 145, at Pages
44499 - 44506.

Tuesday, October 28

The House will meet at 12:30 PM for morning hour and at
2:00 PM for legislative business. Votes will be postponed until 6:30 PM. The House will
consider will consider HRes 395, regarding National Chemistry Week, and
HConRes 279, regarding commitment to support the use of science in governmental
decision making. The other items on the agenda are not tech related. See,
Republican Whip Notice.

9:00 AM. The House Ways and Means
Committee will meet to mark up
HR 2896,
the "American Jobs Creation Act of 2003". This bill would, among other
things, replace the FSC & ETI tax regimes that the WTO held to be
illegal export subsidies. Location: Room 1100, Longworth Building. This mark
up was previously scheduled for Monday, October 27.

12:00 NOON. The Cato
Institute will host a book forum.
Charles Murray will discuss his book (due for
release on October 21) titled Human Accomplishment: The Pursuit of Excellence
in the Arts and Sciences, 800 B.C. to 1950. See,
Amazon page. Lunch will
follow the program. Location: Cato, 1000 Massachusetts Ave., NW.

Deadline to submit comments to the Office
of Management and Budget (OMB) regarding its proposal "to issue new guidance
to realize the benefits of meaningful peer review of the most important
science disseminated by the federal government regarding regulatory topics."
See, OMB
document [14 pages in PDF] titled "Peer Review and Information Quality".

10:00 AM - 12:00 NOON. The
Department of
State's (DOS) Advisory Committee on International Communications and
Information Policy (ACICIP) will meet. Ambassador
David Gross, U.S.
Coordinator for International Communications and Information Policy, is
scheduled to attend. The agenda includes "communications policy issues, future
directions of the Committee's work, discussion regarding countries of
particular interest to the ACICIP, preparations for the World Summit on the
Information Society, and consultation regarding the most important emerging
technologies". See,
notice in the Federal Register, October 10, 2003, Vol. 68, No. 197, at
Page 58744. Location: Room 1107, Harry S. Truman Building, 2201 C Street, NW.

10:00 AM. The Senate
Commerce Committee will hold a hearing on the "preservation and advancement of
universal service, including the impact of competition and the emergence of new technologies
and services". Sen. John McCain (R-AZ) will
preside. Michael Powell, Chairman
of the Federal Communications Commission, will testify.
The hearing will be webcast. See,
notice.
Press contact: Rebecca Hanks (McCain) at 202 224-2670 or Andy Davis (Hollings) at 202
224-6654. Location: Room 253, Russell Building.

9:00 AM. The
House Ways and Means Committee will continue its hearing titled "United
States -- China Economic Relations and China's Role in the Global Economy".
See,
notice. Location: Room 1100, Longworth Building.

Deadline for the telemarketers to submit their brief to the
U.S.
Court of Appeals (10thCir) in FTC v. Mainstream Marketing Service,
No. 03-1429. This is the telemarketers' constitutional challenge to the FTC's
do not call registry. See, October 8, 2003
order [24 pages in
PDF] staying the District Court's opinion, and setting an expedited schedule.

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